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Suppose a monopoly is producing its profit-maximising output level.Now suppose the government imposes a lump-sum tax on the monopoly,independent of its output.As a result,the monopolist will increase the price of its product to cover its higher cost.

A) True
B) False

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Insurance companies typically charge women lower prices than men for automobile insurance.Is this an example of price discrimination?


A) No,because,on average,women have better driving records than men and the costs of insuring men are greater than the costs of insuring women.
B) Yes,because the costs of selling insurance to men and women are the same.
C) Yes,because insurance companies can prevent arbitrage;that is,women cannot transfer their insurance coverage to men.
D) No,because there are too many insurance companies for any one company to have market power.A firm must possess market power in order to practice price discrimination.

E) C) and D)
F) A) and D)

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The market demand curve facing a monopolist is more elastic than the market demand curve facing a monopolistic competitor.

A) True
B) False

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If a firm could practice perfect price discrimination,it would


A) allow resale of its product.
B) charge every buyer a different price.
C) charge a price based on the quantity of a product bought.
D) use odd pricing.

E) A) and C)
F) A) and B)

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Table 9-3 Table 9-3 Julie plans to start a pet-sitting service.She surveyed her neighbourhood to determine the demand for this service.Assume that each person surveyed demands only one hour of pet sitting services per period.Table 9-3 above shows a portion of her survey results. -Refer to Table 9-3.Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7.What is the value of the consumer surplus enjoyed by her customers? A) $39 B) $28 C) $11 D) $0 Julie plans to start a pet-sitting service.She surveyed her neighbourhood to determine the demand for this service.Assume that each person surveyed demands only one hour of pet sitting services per period.Table 9-3 above shows a portion of her survey results. -Refer to Table 9-3.Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7.What is the value of the consumer surplus enjoyed by her customers?


A) $39
B) $28
C) $11
D) $0

E) None of the above
F) A) and B)

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Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.As a result of this change


A) Price will be higher,output will be lower and the deadweight loss will be eliminated.
B) Consumer surplus will be smaller,producer surplus will be greater and there will be a reduction in economic efficiency.
C) Price will be higher,consumer surplus will be greater and output will be greater.
D) Consumer surplus will be smaller and producer surplus will be greater.There will be a net increase in economic surplus.

E) All of the above
F) A) and D)

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Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost,the efficient level of output.

A) True
B) False

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In discussions of barriers to entry,what is meant by the term 'virtuous cycle'?


A) A virtuous cycle refers to successful research and development that leads to information that is used to develop other new products.
B) A virtuous cycle refers to a firm using the profits from a monopoly in one market to establish a monopoly in another market.
C) A virtuous cycle refers to the situation where the pursuit of self-interest in establishing an entry barrier leads to an increase in social welfare (the 'invisible hand') .
D) A virtuous cycle refers to a situation where if a firm can attract enough customers initially,it can attract additional customers because its product's value has been increased by other customers using it,which attracts even more customers.

E) B) and C)
F) A) and B)

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Which one of the following about a monopoly is false?


A) A monopoly could make profits in the long run.
B) A monopoly could break even in the long run.
C) A monopoly must have some kind of government privilege or government-imposed barrier to maintain its monopoly.
D) A monopoly status could be temporary.

E) A) and B)
F) A) and C)

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Which of the following is a necessary condition for successful price discrimination?


A) The seller must possess market power.
B) The buyer must possess market power.
C) Transactions costs must be zero.
D) Buyers must have identical inelastic demands.

E) None of the above
F) All of the above

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A monopoly is defined as a firm that has the largest market share in an industry.

A) True
B) False

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Assume that a monopolist practices perfect price discrimination.The firm will produce an output rate


A) that is less than the efficient level of output.
B) that is greater than the efficient level of output.
C) that is equal to the efficient level of output.
D) that converts consumer surplus into a deadweight loss.

E) B) and D)
F) B) and C)

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Figure 9-14 Figure 9-14 -Refer to Figure 9-14 to answer the following questions. a.What quantity will this monopoly produce and what price will it charge? b.Suppose the monopoly is regulated.If the regulatory agency wants to achieve economic efficiency,what price should it require the monopoly to charge? c.To achieve economic efficiency,what quantity will the regulated monopoly produce? d.Will the regulated monopoly make a profit if it charges the price that will achieve economic efficiency? e.Suppose the government decides to regulate the monopoly by imposing a price ceiling of $35.What quantity will the monopoly produce and what price will the monopoly charge? f.With the price ceiling of $35,what profit will the monopoly earn? -Refer to Figure 9-14 to answer the following questions. a.What quantity will this monopoly produce and what price will it charge? b.Suppose the monopoly is regulated.If the regulatory agency wants to achieve economic efficiency,what price should it require the monopoly to charge? c.To achieve economic efficiency,what quantity will the regulated monopoly produce? d.Will the regulated monopoly make a profit if it charges the price that will achieve economic efficiency? e.Suppose the government decides to regulate the monopoly by imposing a price ceiling of $35.What quantity will the monopoly produce and what price will the monopoly charge? f.With the price ceiling of $35,what profit will the monopoly earn?

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a.Quantity = 835 units and Price = $59.
...

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Which of the following statements is true?


A) If a tax is imposed on a product sold by a monopolist,the monopolist will maximise its profits by producing where marginal revenue equals marginal cost.
B) A monopolist will always charge the highest possible price.
C) If a tax is imposed on a product sold by a monopolist,the monopolist can increase its price to pass along the entire tax to consumers.
D) Because a monopolist faces no competition,the demand for its product is perfectly inelastic.

E) All of the above
F) B) and C)

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From an economic perspective,price discrimination is desirable because


A) the increase in profits is more than offset by the loss in consumer surplus,resulting in a net increase in economic surplus.
B) it enables firms to increase profits with no loss in economic surplus,and in turn,this could provide firms with incentives to engage in beneficial product innovation.
C) the increase in profits results in higher corporate tax revenues received by the government,which could be used to subsidise consumption for low-income individuals.
D) it redistributes wealth from wealthy consumers to highly innovative firms.

E) A) and B)
F) A) and C)

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Network externalities


A) can only exist when there are economies of scale.
B) prevent the dominance of a market by one firm.
C) exist when the usefulness of a product increases with the number of consumers who use it.
D) are created when celebrity endorsements of products lead to a surge in the demand for those products.

E) A) and D)
F) A) and C)

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Assume that a monopolist practices perfect price discrimination.The firm's marginal revenue curve will


A) be perfectly elastic.
B) be equal to its demand curve.
C) will be perfectly inelastic.
D) will lie below its demand curve.

E) B) and D)
F) None of the above

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Figure 9-6 Figure 9-6 Figure 9-6 shows the cost and demand curves for a monopolist. -Refer to Figure 9-6.The monopolist's total cost is A) $1116. B) $1240. C) $1660. D) $1726.40. Figure 9-6 shows the cost and demand curves for a monopolist. -Refer to Figure 9-6.The monopolist's total cost is


A) $1116.
B) $1240.
C) $1660.
D) $1726.40.

E) All of the above
F) B) and C)

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What is a network externality?


A) It refers to having a network of suppliers and buyers for a good or service.
B) It refers to lobbying to form a public enterprise.
C) It refers to a situation in which a product's usefulness increases with the number of people using it.
D) It refers to a product that requires connection to a network for it to be useful.

E) All of the above
F) C) and D)

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Table 9-3 Table 9-3 Julie plans to start a pet-sitting service.She surveyed her neighbourhood to determine the demand for this service.Assume that each person surveyed demands only one hour of pet sitting services per period.Table 9-3 above shows a portion of her survey results. -Refer to Table 9-3.Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7.How many hours will be purchased and what is her total revenue? A) 5 hours;total revenue = $35 B) 4 hours;total revenue = $28 C) 3 hours;total revenue = $21 D) 2 hours;total revenue = $14 Julie plans to start a pet-sitting service.She surveyed her neighbourhood to determine the demand for this service.Assume that each person surveyed demands only one hour of pet sitting services per period.Table 9-3 above shows a portion of her survey results. -Refer to Table 9-3.Suppose Julie's marginal cost of providing this service is constant at $7 and she charges $7.How many hours will be purchased and what is her total revenue?


A) 5 hours;total revenue = $35
B) 4 hours;total revenue = $28
C) 3 hours;total revenue = $21
D) 2 hours;total revenue = $14

E) B) and C)
F) A) and D)

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